First-time buyers helped offset the decline
Applications for new home purchases dropped 6% month over month in September, following seasonal trends, but the Mortgage Bankers Association (MBA) reported that interest from first-time homebuyers remained strong.
The year-over-year data shows a more positive trend, with applications up 10.8% from September 2023, reflecting ongoing demand for newly built homes.
"Applications for new home purchases declined in September, consistent with seasonal patterns, and continued to run ahead of last year's pace,” said Joel Kan, vice president and deputy chief economist of the MBA. “New home sales continue to be an appealing option for prospective homebuyers as mortgage rates were lower during the month and more newly built options have been coming on to the market.”
MBA’s data showed an increase in FHA loan applications, which accounted for nearly 29% of all mortgage applications for new homes in September, a sign that first-time buyers are active, Kan noted. First-time homebuyers often utilize FHA loans due to lower down payment requirements.
Conventional loans made up the majority of new home purchase applications in September, accounting for 61.2% of the total. FHA loans followed at 28.7%, while VA loans and RHS/USDA loans represented 9.6% and 0.4%, respectively.
MBA estimated that new single-family home sales were running at a seasonally adjusted annual rate of 680,000 units in September 2024, a decrease of 12.4% compared to August's adjusted rate of 776,000 units. On an unadjusted basis, MBA estimated around 54,000 new homes were sold in September, down 10% from 60,000 in the previous month.
The average loan size for new homes rose from $395,935 in August to $402,658 in September, reflecting both an increase in the cost of new homes and demand from buyers.
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The decline in September's application volume is not unexpected given the typical seasonal patterns in the housing market. However, with first-time buyers remaining active and mortgage rates showing some relief, the demand for new homes is likely to remain resilient.
MBA’s builder application survey provides an early snapshot of new home sales, often aligning with the US Census Bureau’s monthly New Residential Sales report, which measures contract signings for new homes.
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